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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Palace Capital Plc | LSE:PCA | London | Ordinary Share | GB00BF5SGF06 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
3.00 | 1.26% | 241.00 | 238.00 | 241.00 | 242.00 | 241.00 | 241.00 | 108,409 | 16:35:17 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Real Estate Agents & Mgrs | 33.3M | -35.7M | -0.9506 | -2.55 | 90.9M |
TIDMPCA
RNS Number : 8161T
Palace Capital PLC
19 November 2019
19 November 2019
PALACE CAPITAL PLC
("Palace Capital" or the "Company")
Interim Results for the 6 months ended 30 September 2019
CAPITAL EXPITURE STRATEGY AND INCREASED LETTING ACTIVITY UNDERPIN CONTINUED POSITIVE PERFORMANCE
Palace Capital (LSE: PCA), the UK REIT that has a diversified portfolio of UK regional commercial real estate in carefully selected locations outside of London, is pleased to announce its unaudited results for the six months ended 30 September 2019.
HIGHLIGHTS
Continued total property return outperformance
-- Total property return of 1.5% over the period, outperforming the MSCI UK Quarterly Benchmark of 0.8% and marking three successive years of outperformance
-- EPRA earnings increased to GBP6.7 million (September 2018: GBP3.5 million) reflecting underlying strength of investment portfolio
-- EPRA EPS of 14.5p, 153% cover of 9.5p dividend for the six-month period -- Q2 dividend of 4.75p declared and payable in December 2019 -- IFRS net assets of GBP178.7 million maintained (March 2019: GBP180.3 million) -- EPRA NAV per share 391p reduced by 3.9% (March 2019: 407p)
-- Conservative gearing maintained at 34% LTV and weighted average interest rate reduced from 3.3% to 3.2%
-- WAULT increased to 5.2 years to break and 6.6 years to expiry (31 March 2019: 4.5 years to break) as a result of lease renewals and new lettings
-- Converted to REIT status with effect from 1 August 2019
-- Increased revolving credit facility with NatWest to GBP40 million and extended for a further five years at a lower margin
Active asset management delivering long term portfolio enhancement
-- Hudson Quarter flagship development scheme in York, which includes 127 apartments with over 20% already sold or under offer, on track for completion in January 2021
-- Planning consent secured for 28 apartments and 4,000 sq ft of retail space at 45 High Street, Weybridge, Surrey in one of the UK's most affluent areas
-- GBP13.2 million of disposals during the period, including remaining non-core residential units from Warren Portfolio
-- Overall EPRA occupancy at 84% reducing temporarily as we continue to focus on strategic refurbishment or redevelopment delivering long term benefits
Positive leasing momentum driving income
-- 12 lease renewals and five rent reviews completed at an average 3% above ERV and a 25% uplift on previous passing rents, creating GBP0.4 million additional annual rental income
-- Nine new leases provided an additional GBP0.5 million of annual income, including:
o 23,500 sq ft at Sol, Northampton to Gravity Fitness for a minimum term of 10 years at a 17% premium to ERV
o 14,665 sq ft of space let at Boulton House, Manchester, bringing the asset to 82% occupancy with 13,170 sq ft remaining to be let
-- Lease surrender with Forensic Science Service at Priory House, Birmingham secured GBP2.85 million, being all the remaining rent due under the lease, and discussions underway to dispose of remaining short leasehold interest
-- Adjoining site to the 28,000 sq ft holding at 24 Blackwater Way, Aldershot acquired for GBP0.2 million and a new 10-year lease agreed with BHW Automotive Limited for the entire property at a rent of GBP227,000 per annum exclusive, an increase of GBP10,000 per annum. The lease benefits from a fixed increase after five years to GBP250,254 per annum and the latest valuation of the property shows a 51% capital value uplift as a result
Balance Sheet 30 Sept 2019 31 March 2019 Property valuation GBP275.8m GBP286.3m Net assets GBP178.7m GBP180.3m EPRA NAV per share 391p 407p Income Statement Six months to Six months to 30 Sept 2019 30 Sept 2018 Profit after tax GBP2.6m GBP7.3m EPRA earnings GBP6.7m GBP3.5m Earnings per share 5.6p 15.9p EPRA earnings per share 14.5p 7.7p Adjusted earnings per share 8.5p 8.0p Total accounting return -1.5% 3.7% Total shareholder return 0.2% -3.8% Total dividend per share 9.5p 9.5p Dividend cover* 90% 84%
*Dividend cover is calculated on the adjusted earnings per share which is a recurring earnings basis and specifically excludes the one-off significant surrender premium of GBP2.85m received in the current period.
Neil Sinclair, Chief Executive of Palace Capital said:
"During the period we have stepped up our development activity, a strategy we believe is best placed to increase shareholder value in the long term by creating an even stronger portfolio that can meet the demand we are seeing outside of London for well located, fit for purpose property that delivers higher quality income and capital growth. Our commitment to a total return strategy is now starting to pay off, both in terms of income and capital growth, and should enable us to maintain our positive performance.
"At the end of June, we placed 20 apartments at Hudson Quarter, York, on the market and demand has been such that we have now sold 21 with a further 7 under offer. We are well ahead of our business plan at Hudson Quarter and with letting activity brisk on our other refurbishments, we are most encouraged despite the current political uncertainty."
Stanley Davis, Chairman of Palace Capital said:
"Our strategy at Palace Capital is delivering growth, both in terms of income and long-term capital value, and I am very pleased that we have now outperformed the MSCI IPD Quarterly Benchmark for three consecutive years. While the significant capital expenditure we have deployed across a number of different properties has not yet fully resulted in a corresponding uplift in property valuations due to the time lag between completing capital works and letting the refurbished space, and therefore has had a slight impact on our NAV, I firmly believe this investment will support our future growth. In the six years since our re-admission in October 2013 we have produced a total accounting return of 123%, outperforming almost the entire peer group.
"We continue to abide by a disciplined acquisition policy and, having not assessed a suitable opportunity in the period that meets our strict criteria, we believe that the best use of capital to deliver value for our shareholders in the current market is to unlock the growth potential in our existing portfolio. The Board is confident Palace Capital is well positioned for the future, with a strong core income profile and a number of value-enhancing refurbishment and redevelopment opportunities."
For further information please contact:
PALACE CAPITAL PLC
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331
Broker
Numis Securities
Heraclis Economides / Oliver Hardy
Tel: +44 (0)20 7260 1000
Broker
Arden Partners plc
Corporate Finance: Paul Shackleton / Ciaran Walsh / Daniel Gee-Summons
Corporate Broking: James Reed-Daunter
Tel: +44 (0)207 614 5900
Financial PR
FTI Consulting
Claire Turvey / Methuselah Tanyanyiwa
Tel: +44 (0)20 3727 1000
palacecapital@fticonsulting.com
About Palace Capital plc (www.palacecapitalplc.com)
Palace Capital plc (LSE: PCA) is a UK REIT that has a GBP275.8 million diversified portfolio of UK regional commercial property. The Company maintains a disciplined investment strategy focused on towns and cities outside of London that are characterised by thriving local economies and strengthening fundamentals. Within those locations the highly experienced management team select assets that provide opportunities to drive both capital value and long-term rental income through tailored active asset management programmes ultimately delivering attractive shareholder returns.
www.palacecapitalplc.com
CHAIRMAN'S STATEMENT:
I am pleased to report our interim results for the six months ended 30 September 2019. Overall, we have had an encouraging start to the year as we continue to work hard to ensure our strategic aims are met and that we are delivering value to our Shareholders despite the ongoing political and economic uncertainty in the UK.
PERFORMANCE:
Our total property return is 1.5% and the Group made a profit after tax of GBP2.6 million in the period with an EPS of 5.6p per share. EPRA earnings totalled GBP6.7 million, translating to an EPRA EPS of 14.5p per share and providing over 150% cover for dividends in the period of 9.5p per share. An alternative measure of recurring earnings is our adjusted earnings of GBP3.9 million, which excludes the GBP2.85 million in cash received from the surrender of the lease at Priory House, Birmingham, and totalled 8.5p per share for the six months to 30 September 2019 (September 2018: 8.0p per share).
Following shareholder support for our conversion to a UK REIT on 1 August, we are already experiencing tax savings and we expect these to continue to flow through for the remainder of this financial year.
In the first half of the year, our style of active management continued to deliver improvements through our highly skilled and experienced team, resulting in a number of successful lettings, renewals and rent reviews. As a result of this we generate the necessary income which allows us to maintain our dividend, while growing the net assets of the Company.
In line with our strategy, we have tactically reserved space for refurbishment or redevelopment. This means that portfolio occupancy has fallen to 84% whilst we await appropriate planning consent for certain redevelopments, and in some instances, we have let space on a short-term basis. This normally means lower rentals than conventional leases, but we believe the long-term benefits will justify this approach in the current investment market. A case in point is the Hudson Quarter development in York, where we are now starting to reap the benefits as planned.
As at 30 September 2019, our portfolio was independently valued by Cushman and Wakefield at GBP275.8 million with an annual contracted rent roll of GBP16.3 million and a net income after property costs of GBP14.8 million per annum.
Our EPRA NAV has decreased by 3.9% to 391p per share (March 2019: 407p) as we continue to invest in our portfolio and dispose of non-core assets. However, we have maintained net assets which have only slightly reduced to GBP178.7 million as compared to GBP180.3 million in March 2019, a reduction of less than 1%.
Recurring income growth is a continuing focus but increasing our capital values is also a priority. For the six months to 30 September 2019 there was a 32% uplift in rental income, including the surrender premium net of irrecoverable costs, which totalled GBP10.7 million (up from GBP8.1 million for the six months to 30 September 2018). Our contractual passing rental income totalled GBP16.3 million per annum compared to an ERV of GBP21.2 million per annum and it is this growth-gap that we are targeting in order to further increase our income and improve dividend cover.
Our second quarterly dividend of 4.75p will be payable on 27 December 2019 to shareholders on the register as at 6 December 2019 and this will take us to 9.5p for the six-month period. The dividend will include a Property Income Distribution (PID) in light of the minimum REIT distribution requirements.
While our ability to cover our dividend has been limited by the fact that we have not made a significant earnings enhancing acquisition since 1 Derby Square, Liverpool in December 2018, we remain committed to our investment criteria. While we are constantly looking at possible acquisitions, my colleagues and I believe that in the current market, investing in our core portfolio is the correct strategy for our shareholders and we intend to maintain this approach for the foreseeable future.
I stated last year that we are somewhat different from our peer group. Firstly, the majority of our acquisitions have been of corporate entities; we have saved in excess of GBP10.0 million in SDLT (Stamp Duty Land Tax) since re-admission and have inherited tax losses and unclaimed capital allowances. Secondly, we are a total return property company and consequently we are prepared to redevelop or refurbish our assets in order to create additional value. We believe this approach will outperform a pure income policy over time.
In any event the real estate investment market has been particularly subdued, and leading agents are reporting much lower volumes of transactions from their capital market divisions. This is likely to continue whilst there is political uncertainty in the UK. In the meantime, this is impacting our share price which does not fully reflect the underlying net asset value of the Company. However, we have maintained our performance and we are well positioned to unlock further value from within the portfolio.
Overall, we have a strong and well-located core portfolio with sustainable income from high quality tenants, as well as significant reversionary potential to grow rental income by over 30% together with the added value of a pipeline of development and refurbishment projects.
We therefore approach the second half of the year with confidence.
MARKET BACKDROP:
The UK regional office market remains robust, particularly in those locations where we have significant holdings.
In Manchester, according to Savills Research published in September, the total office take up for the six months to 30 June was 806,024 sq ft, which is 7% ahead of the same period last year and 32% ahead of the five-year average. Alongside this significant rise in demand, office availability has fallen to its lowest level ever.
Savills research in August also showed that Leeds, where we own a 90,000 sq ft building at Bank House, King Street, saw record take up in the first half of the year. 436,312 sq ft of office space was leased, 41% ahead of the same period last year, including major lettings of 71,000 sq ft at Central Square and 135,000 sq ft at 4 Wellington Place.
Finally, there is ever increasing activity in Liverpool. We have highlighted that we are seeing a broader trend of occupiers relocating from out of town properties into city centres, which are often more accessible for employees and provide them with a more vibrant surrounding as work and leisure time becomes increasingly blended. Sony recently announced that it is moving from the Wavertree Technology Park on the city outskirts and taking 65,000 sq ft at the former Liverpool Echo building in the city centre. In addition, BT, which has a requirement for 100,000 sq ft, has shortlisted three city centre locations and is expected to make a decision by the end of this year.
Since 2014, Liverpool has lost over 1 million sq ft of office space which has been converted to either residential or student accommodation; this trend has been felt across the UK and we have focused in the regions on those cities which have a limited and dwindling office supply. With political parties stating that they intend to commit investment towards connectivity and a better regional transport infrastructure, we are well placed to take advantage of this policy.
Regional office returns have exceeded those generated by London every year since 2016. In addition, regional offices (48% of the Company's portfolio) provide the strongest, risk adjusted sector in the UK and remain a key sector that we are focused on. In contrast, the retail sector continues to contract but our conservative strategy means we have a very limited exposure and the assets that we do hold are primarily let to tenants with quality covenants.
PORTFOLIO ACTIVITY:
Hudson Quarter, Toft Green, York
Construction commenced on this two-acre site in February 2019 and it remains on time and on budget. Progress on the residential sales is well ahead of expectations and soft marketing has now commenced to let the office space. Our drawdown with Barclays commences next month, so all costs to date, including demolition, have been met from our own resources. Given the backdrop of political uncertainty, we are delighted with progress to date.
Sol, Northampton
We have faced challenges in the leisure sector which are well known, particularly since we accepted the surrender of the Gala Casino lease for GBP4 million in 2015. However, our asset management strategy is now delivering positive results; not only did we let 12,000 sq ft to Soo Yoga earlier this year, but we have also let 23,500 sq ft to Gravity Fitness for a minimum term of 10 years at 17% above the ERV with additional rent achievable based on turnover targets. The scheme is now 89% let and strong interest is being shown in the remaining 21,000 sq ft.
Boulton House, Chorlton Street, Manchester
We acquired this 75,000 sq ft office building in Manchester city centre for GBP10.6 million just before the Referendum result in June 2016, when most of our competitors withdrew from the market. The property is now valued at GBP15.2 million, after a circa GBP800,000 refurbishment, and we are achieving close to GBP19.00 per sq ft, a significant increase from the rents of GBP12.50-GBP13.50 per sq ft at the point of purchase.
41-45, High Street, Weybridge, Surrey
Planning consent was secured in July 2019 for 4,000 sq ft of retail space and 28 apartments on this prime site, which is immediately opposite a Waitrose supermarket. We have commenced stripping out the existing building to mitigate the rates liability and the professional team are now being engaged with a view to us commencing the scheme late next year.
2-3 St James' Gate, Newcastle-upon-Tyne
We have committed circa GBP2.5 million to refurbish two vacant floors, the entrance hall and other areas in order to give the building a more prominent identity. There is an underlying shortage of Grade A space in Newcastle and we believe that this property has excellent growth prospects, both in terms of income and capital value in light of the rents being achieved on similar buildings in the area.
249 Midsummer Boulevard, Milton Keynes
We are currently evaluating a major development of this site and we intend to make appointments to move forward with a planning application in the near future. We have already received a preliminary report indicating that the site is capable of a scheme with a floor area of more than double the existing property. In the meantime, it will be our intention to limit our outgoings by letting the vacant space on a relatively short-term basis. An economic report called 'UK Powerhouse', published by the leading law firm Irwin Mitchell and the Centre for Economic Research in July of this year, reveals that Milton Keynes will be the fastest growing city at the start of 2021. This was affirmed by national commercial consultancy Lambert Smith Hampton in research released in February of this year.
Imperial Court & Imperial House, Leamington Spa
These two adjacent office buildings totalling 40,000 sq ft stand on a 1.5-acre town centre site and currently produce GBP600,000 per annum on leases expiring in 2022. This is a high value location and we will shortly start assessing future redevelopment options.
Lendal, Museum Street, York
This retail and office building was part of the Warren Portfolio acquired in 2017. There is a critical shortage of office space in York, so we took the decision to refurbish 5,600 sq ft of offices on the upper floors. We have let one floor at a headline rental of GBP22.50 per sq ft which is the highest achieved within York. We have agreed terms to let the majority of the remaining space.
Regency House, High Street, Winchester
This office building is also part of the Warren Portfolio. Part was let on acquisition, but we have refurbished 4,500 sq ft, most of which is now under offer at rents in excess of what we might have expected at the point of purchase.
BALANCE SHEET:
Despite a challenging economic backdrop, we are well capitalised and continue to remain conservatively geared at 34% net of cash. At the half year we had borrowings of GBP106.9 million, of which 63% is hedged. We pride ourselves on having a productive working relationship with our lenders, as demonstrated by our increased GBP40 million NatWest Revolving Credit Facility, which was secured in August of this year for a further term of five years at a lower margin. The contribution from our lenders is key to maintaining an efficient capital structure and enhancing the performance of our business.
CONCLUSION AND OUTLOOK:
These results are being announced in the middle of a General Election campaign. All parties are encouraging economic development in the UK's regions and with our assets being well-positioned in the right locations, we are well placed to take advantage of this. Our core income producing properties, together with our development and refurbishment pipeline and the ongoing progress at Hudson Quarter, means that we can expect to generate significant value for shareholders over the long term.
We have holdings in towns and cities that are affected by a lack of development and the loss of office use to residential, and this supply / demand pressure is leading to increasing rental values.
Property is a medium to long term investment and I remain confident that we are well positioned to continue to grow the value of our portfolio for our investors. Although I have been in business a long time, I believe the best years for Palace Capital are yet to come in what continues to be an exciting journey.
Statement of principal risks and uncertainties
Whilst we consider there has been no material changes to the Group's principal risks, as set out on pages 40-41 of the Annual Report and Accounts for the year ended 31 March 2019, several risks associated with the commercial property market in general are elevated as a result of the continuing political uncertainty surrounding the UK's departure from the EU and the General Election.
The Board continues to monitor external events and is taking appropriate action to prepare for any short-term risks that could arise whilst this period of uncertainty continues. Our business is resilient, and we are able to respond quickly, positioning us well for the longer term.
Statement of directors' responsibilities
The directors' confirm that the condensed set of consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during the first six months and their impact on the condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Palace Capital plc are listed on the Company website https://www.palacecapitalplc.com/
By order of the Board
Stanley Davis, Chairman
18 November 2019
Palace Capital plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2019
Notes Unaudited Unaudited Audited 6 months 6 months Year to to to 31 March 30 September 30 September 2019 2019 2018 GBP000 GBP000 GBP000 Rental and other income 3 11,917 9,210 18,750 Property operating expenses (1,214) (1,101) (2,318) -------------------------------------- -------------- ------ ------------------- ------------------- ------------------- Net property income 10,703 8,109 16,432 Dividend income from listed equity investments 53 - 43 Administrative expenses (2,193) (1,985) (4,122) Operating profit before gains and losses on property assets and listed equity investments 8,563 6,124 12,353 (Loss)/profit on disposal of investment properties (24) 211 218 (Loss)/gain on revaluation of investment properties 8 (6,177) 3,880 (382) Impairment of trading properties 8 (305) - - Loss on disposal of assets held for sale (269) - (579) Impairment on assets held for sale 8 - - (291) Gain/(loss) on revaluation of listed equity investments 101 - (214) Operating profit 1,889 10,215 11,105 Finance income 11 11 20 Finance expense (2,414) (1,953) (3,763) Changes in fair value of interest rate derivatives (663) 77 (929) (Loss)/profit before taxation (1,177) 8,350 6,433 Taxation 4 3,729 (1,078) (1,263) ------------------------------------------------------ ------ ------------------- ------------------- ------------------- Profit for the period and total comprehensive income 2,552 7,272 5,170 ====================================================== ====== =================== =================== =================== Earnings per ordinary share Basic 6 5.6p 15.9p 11.3p Diluted 6 5.6p 15.8p 11.3p
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Palace Capital plc
Condensed consolidated statement of financial position
30 September 2019
Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 Notes GBP000 GBP000 GBP000 Non-current assets Investment properties 8 255,514 260,178 258,331 Listed equity investments at fair value 3,066 - 2,636 Right of use asset 405 - - Property, plant and equipment 81 103 97 259,066 260,281 261,064 --- ----- ------------- ------------- --------- Current assets Assets held for sale 8 - 21,708 11,756 Trading property 8 18,895 - 14,367 Trade and other receivables 9 7,102 5,702 6,243 Cash and cash equivalents 10 13,965 13,818 22,890 ----------------------------------- ----- ------------- ------------- --------- Total current assets 39,962 41,228 55,256
----------------------------------- ----- ------------- ------------- --------- Total assets 299,028 301,509 316,320 ----------------------------------- ----- ------------- ------------- --------- Current liabilities Trade and other payables 11 (9,700) (8,460) (10,001) Borrowings 12 (1,836) (6,124) (5,999) ----------------------------------- ----- ------------- ------------- --------- Total current liabilities (11,536) (14,584) (16,000) ----------------------------------- ----- ------------- ------------- --------- Net current assets 28,426 26,644 39,256 ------------------------------------------ ------------- ------------- --------- Non-current liabilities Borrowings 12 (105,026) (91,692) (112,017) Deferred tax (204) (6,972) (5,580) Lease obligations (2,240) (1,587) (1,585) Derivative financial instruments 13 (1,335) (104) (815) ----------------------------------- ----- ------------- ------------- --------- Total non-current liabilities (108,805) (100,355) (119,997) ----------------------------------- ----- ------------- ------------- --------- Net Assets 178,687 186,570 180,323 ----------------------------------- ----- ------------- ------------- --------- Equity Share capital 14 4,639 4,639 4,639 Share premium account 125,019 125,019 125,019 Merger reserve 3,503 3,503 3,503 Capital redemption reserve 340 340 340 Treasury share reserve (1,348) (1,893) (1,771) Retained earnings 46,534 54,962 48,593 ----------------------------------- ----- ------------- ------------- --------- Equity shareholders' funds 178,687 186,570 180,323 ------------------------------------------ ------------- ------------- --------- Basic NAV per ordinary share 7 388p 407p 393p Diluted NAV per ordinary share 7 388p 406p 392p EPRA NAV per ordinary share 7 391p 421p 407p ------------------------------- ----- ------------- ------------- ---------
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
The condensed consolidated interim financial statements were approved by the Board of Directors on 18 November 2019.
Palace Capital plc
Condensed consolidated statement of cash flows
For the six months ended 30 September 2019
Notes Unaudited 6 months Unaudited Audited to 6 months to Year to 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 Operating activities Loss before tax (1,177) 8,350 6,433 Adjustments for non-cash items: Loss/(gain) on revaluation of properties 8 6,177 (3,880) 382 Impairment of trading properties 8 305 - - Loss on revaluation of assets held for sale 8 - - 291 Gain on revaluation of investments 8 (101) - 214 Loss/(profit) on sale of investment properties 8 24 (211) (218) Loss on disposal of investment property held for sale 8 269 - 579 Depreciation 98 16 31 Share-based payment 100 113 332 Net finance costs 3,066 1,865 4,672 -------------------------------------- ------ ------------- ------------- --------- Cash generated by operations 8,761 6,253 12,716 Changes in working capital (1,300) (1,070) (796) -------------------------------------- ------ ------------- ------------- --------- Cash flows from operations 7,461 5,183 11,920 Interest received 11 11 20 Interest and other finance costs paid (1,985) (1,620) (3,405) Corporation tax received/(paid) (1,554) 9 (1,639) Cash flows from operating activities 3,933 3,583 6,896 -------------------------------------- ------ ------------- ------------- --------- Investing activities Purchase of investment property 8 - (797) (15,505) Capital expenditure on refurbishments of property 8 (3,061) (2,368) (2,453) Capital expenditure on developments 8 (1,363) - (1,923) Capital expenditure on trading property 8 (4,833) - (535) Proceeds from disposal of investment properties 8 1,476 948 2,078 Proceeds from assets held for sale 8 11,488 - 9,082 Amounts transferred (into)/out of restricted cash deposits (620) 336 553 Purchase of non-current asset - equity investment (328) - (2,850) Purchase of property, plant and equipment - - (7) Cash flows from investing activities 2,759 (1,881) (11,560) -------------------------------------- ------ ------------- ------------- --------- Financing activities Bank loan repaid (16,717) (6,343) (8,037) Proceeds from new bank loans 5,471 4,146 25,991 Loan issue costs (627) (13) (145) Costs from issue of ordinary share capital - (17) (17) Dividends paid 5 (4,364) (4,355) (8,718) Cash flows from financing activities (16,237) (6,582) 9,074 -------------------------------------- ------ ------------- ------------- --------- Net (decrease)/increase in cash (9,545) (4,880) 4,410 Opening cash and cash equivalents 10 22,395 17,985 17,985 -------------------------------------- ------ ------------- ------------- --------- Closing cash and cash equivalents 10 12,850 13,105 22,395
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Palace Capital plc
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2019
Treasury Share Share Shares Other Retained Total Capital Premium Reserve Reserves Earnings equity GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ----------------------- --------- --------- -------- ---------- ---------- -------- As at 31 March 2018 4,639 125,036 (2,011) 3,843 51,792 183,299 ----------------------- --------- --------- -------- ---------- ---------- -------- Total comprehensive income for the period - - - - 7,272 7,272 Share based payments - - - - 113 113 Costs from issue of new shares - (17) - - - (17) Exercise of share options - - 118 - (118) - Issue of deferred bonus share options - - - - 257 257 Dividends - - - - (4,354) (4,354) As at 30 September 2018 4,639 125,019 (1,893) 3,843 54,962 186,570 ----------------------- --------- --------- -------- ---------- ---------- -------- Total comprehensive income for the period - - - - (2,102) (2,102) Share based payments - - - - 220 220 Exercise of share options - - 122 - (122) - Dividends - - - - (4,365) (4,365)
As at 31 March 2019 4,639 125,019 (1,771) 3,843 48,593 180,323 ----------------------- --------- --------- -------- ---------- ---------- -------- Total comprehensive income for the period - - - - 2,552 2,552 Share based payments - - - - 100 100 Exercise of share options - - 423 - (423) - Issue of deferred bonus share options - - - - 76 76 Dividends - - - - (4,364) (4,364) As at 30 September 2019 4,639 125,019 (1,348) 3,843 46,534 178,687 ======================= ========= ========= ======== ========== ========== ========
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Palace Capital plc
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2019
1 General information
These financial statements are for Palace Capital plc ("the Company") and its subsidiary undertakings (together "the Group").
The Company's shares are admitted to trading on the Main Market of the London Stock Exchange. The Company is domiciled and registered in England and Wales and incorporated under the Companies Act 2006. The address of its registered office is 25 Bury Street, London, SW1Y 6AL. On 1 August 2019 the Company converted to a UK Real Estate Investment Trust ("REIT").
The nature of the Company's operations and its principal activities are that of property investment in the UK.
Basis of preparation
The condensed consolidated financial information included in this half yearly report has been prepared in accordance with the IAS 34 "Interim Financial Reporting", as adopted by the European Union. The current period information presented in this document is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The interim results have been prepared in accordance with applicable International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). These standards are collectively referred to as "IFRS".
The accounting policies and methods of computations used are consistent with those as reported in the Group's Annual Report for the year ended 31 March 2019, except as described below, and are expected to be used in the Group's Annual Report for the year ended 31 March 2020.
The financial information for the year ended 31 March 2019 presented in these unaudited condensed Group interim financial statements does not constitute the Company's statutory accounts for that period but has been derived from them. The Report and Accounts for the year ended 31 March 2019 were audited and have been filed with the Registrar of Companies. The Independent Auditor's Report on the Report and Accounts for the year ended 31 March 2019 was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. The financial information for the periods ended 30 September 2018 and 30 September 2019 are unaudited and have not been subject to a review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board.
The interim report was approved by the Board of Directors on 18 November 2019.
Copies of this statement are available to the public for collection at the Company's Registered Office at 25 Bury Street, London, SW1Y 6AL and on the Company's website, www.palacecapitalplc.com.
Going Concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review the Directors have considered the Group's cash balances, debt maturity profile of its undrawn facilities, and the long-term nature of tenant leases. On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue operational existence for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.
Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.
Changes in accounting policies and disclosures
IFRS 16 Leases (became effective for accounting periods commencing on or after 1 January 2019)
This standard requires lessees to recognise a right-of-use asset and related lease liability representing the obligation to make lease payments. Interest expense on the lease liability and depreciation on the right-of-use asset will be recognised in the Statement of Comprehensive Income. The Directors have assessed the impact of this standard by calculating the present value of minimum lease payments on the head office lease, a right-of-use asset was recognised on the Balance Sheet at 1 April 2019 with a corresponding lease liability, using the cumulative catch up transition approach.
The right-of-use asset will be depreciated over the remaining lease life and the corresponding lease liability interest will also be recognised in the Groups Statement of Comprehensive Income.
2 Segmental reporting
During the period the Group operated in one business segment, being property investment in the UK and as such no further information is provided.
3 Net property income Unaudited Unaudited 6 months 6 months Audited to to Year to 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------------------------------- ------------- ------------- --------- Rent receivable 8,813 8,750 17,960 Surrender premium 2,850 - - Management fees & other income 254 460 790 -------------------------------- ------------- ------------- --------- Total revenue 11,917 9,210 18,750 -------------------------------- ------------- ------------- --------- Service charge & vacant rates (732) (600) (1,844) Other property costs (482) (501) (474) -------------------------------- ------------- ------------- --------- Property operating expenses (1,214) (1,101) (2,318) -------------------------------- ------------- ------------- --------- Net property income 10,703 8,109 16,432 ================================ ============= ============= ========= 4 Taxation Unaudited Unaudited 6 months 6 months Audited to to Year to 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 -------------------------------- ------------- ------------- --------- Current income tax charge 166 637 1,008 Tax overprovided in prior year (168) - 12 Capital gains charged in period 1,649 - 1,194 Deferred tax (5,376) 441 (951) Tax (credit)/charge (3,729) 1,078 1,263 ================================= ============= ============= =========
As a result of the Company's conversion to a REIT on 1 August 2019, the Group is no longer required to pay UK corporation tax in respect of property rental income and capital gains relating to its property rental business. Consequently a GBP3,727,000 credit on the profit and loss account and debit to the balance sheet has been recognised for the reversal of deferred tax provided for capital gains tax due to revaluation of investment properties to fair value and the capital allowances that have been claimed on improvements to investment properties. UK corporation tax was payable for the first 4 months of the period up to 31 July 2019 before entry to the REIT "regime".
5 Dividends Unaudited Unaudited 6 months 6 months Audited to to Year to 30 September 30 September 31 March Payment Date 2019 2018 2019 GBP000 GBP000 GBP000 ----------------------- --------------- ------------- --------------------- ------------ Ordinary dividends paid
----------------------- --------------- ------------- --------------------- ------------ 2018 Interim dividend: 4.75p per share 13 April 2018 - 2,177 2,177 2018 Final dividend: 4.75p per share 31 July 2018 - 2,177 2,177 2019 Interim dividend: 4.75p per share 19 October 2018 - - 2,182 2019 Interim dividend: 28 December 4.75p per share 2018 - - 2,182 2019 Interim dividend: 4.75p per share 12 April 2019 2,182 - - 2019 Final dividend: 4.75p per share 13 July 2019 2,182 - - 4,364 4,354 8,718 ======================== ============================== ===================== ============ Proposed dividend 2020 Q1 interim dividend: 4.75p per share paid on 18 October 2019. 2020 Q2 interim dividend: 4.75p per share payable on 27 December 2019.
Since becoming a REIT on 1 August 2019, the Group is required to distribute at least 90% of qualifying income profits each year as a Property Income Distribution (PID). The first proposed qualifying PID will be on 27 December 2019, which will also consist of an interim dividend (non-PID). Further REIT information is available on the Company's website.
6 Earnings per share
The Group financial statements are prepared under IFRS which incorporates non-realised fair value measures and non-recurring items. Alternative Performance Measures ('APMs'), being financial measures, which are not specified under IFRS, are also used by Management to assess the Group's performance. These include a number of European Public Real Estate Association ('EPRA') measures, prepared in accordance with the EPRA Best Practice Recommendations (BPR) reporting framework the latest update of which was issued in November 2016. We report a number of these measures because the Directors consider them to improve the transparency and relevance of our published results as well as the comparability with other listed European real estate companies.
EPRA Earnings is a measure of operational performance and represents the net income generated from the operational activities. It is intended to provide an indicator of the underlying income performance generated from the leasing and management of the property portfolio. EPRA earnings are calculated taking the profit after tax excluding investment property revaluations and gains and losses on disposals, changes in fair value of financial instruments, associated closeout costs, one-off finance termination costs, share-based payments and other one-off exceptional items. EPRA earnings is calculated on the basis of the basic number of shares in line with IFRS earnings as the dividends to which they give rise accrue to current shareholders. The EPRA diluted earnings per share also takes into account the dilution of share options and warrants if exercised.
Palace Capital also reports an adjusted earnings measure which is based on recurring earnings before tax and the basic number of shares. This is the basis on which the directors consider dividend cover. This takes EPRA earnings as the starting point and then adds back tax and any other fair value movements or one-off items that were included in EPRA earnings. For Palace Capital this includes share-based payments being a non-cash expense and also one-off surrender premiums received. The corporation tax charge (excluding deferred tax movements, being a non-cash expense) is deducted in order to calculate the adjusted earnings per share. The earnings per ordinary share for the period is calculated based upon the following information:
Unaudited Unaudited 6 months 6 months Audited to to Year to 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 -------------------------------------- ------------- ------------- --------- Profit after tax attributable to ordinary shareholders for the period 2,552 7,272 5,170 Adjustments: Loss/(gain) on revaluation of property portfolio 6,482 (3,880) 382 Impairment on assets held for sale - - 291 Loss/(profit) on disposal of investment properties 24 (211) (218) Loss on disposal of assets held for sale 269 - 579 Gain on revaluation of listed equity investments (101) - 214 Debt termination costs 501 - - Fair value loss/(gain) on derivatives 663 (77) 929 Deferred tax relating to EPRA adjustments and capital gains charged (3,727) 441 243 EPRA earnings for the period 6,663 3,545 7,590 -------------------------------------- ------------- ------------- --------- Share-based payments 100 113 332 Surrender premium (2,850) - - -------------------------------------- ------------- ------------- --------- Adjusted profit after tax for the period 3,913 3,658 7,922 -------------------------------------- ------------- ------------- --------- Tax excluding deferred tax on EPRA adjustments and capital gain charged (2) 637 1,020 -------------------------------------- ------------- ------------- --------- Adjusted profit before tax for the period 3,911 4,295 8,942 -------------------------------------- ------------- ------------- --------- Unaudited 6 months Unaudited Audited to 6 months to Year to 30 September 30 September 31 March 2019 2018 2019 -------------------------------- ------------- ------------- ---------- Weighted average number of shares for basic earnings per share 45,940,198 45,806,334 45,834,436 Dilutive effect of share options 32,108 106,695 63,690 Weighted average number of shares for diluted earnings per share 45,972,306 45,913,029 45,898,126 ================================ ============= ============= ========== Earnings per ordinary share Basic 5.6p 15.9p 11.3p Diluted 5.6p 15.8p 11.3p EPRA and adjusted earnings per ordinary share EPRA basic 14.5p 7.7p 16.6p EPRA diluted 14.5p 7.7p 16.5p Adjusted EPS 8.5p 8.0p 17.3p -------------------------------- ------------- ------------- ---------- 7 Net asset value per share
EPRA NAV calculation makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy. EPRA NAV is adjusted to take effect of the exercise of options, convertibles and other equity interests and excludes the fair value of financial instruments and deferred tax on latent gains. EPRA NNNAV measure is to report net asset value including fair values of financial instruments and deferred tax on latent gains.
The diluted net assets and the number of diluted ordinary issued shares at the end of the period assumes that all the outstanding options that are exercisable at the period end are exercised at the option price.
Net asset value is calculated using the following information:
Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------------------------------------ ------------------------- ------------- --------- Net assets at the end of the period 178,687 186,570 180,323 Diluted net assets 178,687 186,570 180,323 Include fair value adjustment on trading properties - - 250 Exclude deferred tax on latent capital gains & capital allowances 204 6,972 5,580 Exclude fair value of financial instruments 1,335 104 815 ------------------------------------ ------------------------- ------------- --------- EPRA NAV 180,226 193,646 186,968 Include deferred tax on latent
capital gains & capital allowances (204) (6,972) (5,580) Include fair value of financial instruments (1,335) (104) (815) ------------------------------------ ------------------------- ------------- --------- EPRA NNNAV 178,687 186,570 180,573 ------------------------------------ ------------------------- ------------- --------- Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 --------------------------------- ------------- ------------- -------------- Number of ordinary shares issued at the end of the period 46,036,508 45,843,866 45,883,249 Dilutive effect of share options 32,108 106,695 63,690 --------------------------------- ------------- ------------- -------------- Number of diluted ordinary shares for diluted and EPRA net assets per share 46,068,616 45,950,561 45,946,939 --------------------------------- ------------- ------------- -------------- Net assets per ordinary share Basic NAV 388p 407p 393p Diluted NAV 388p 406p 392p EPRA NAV 391p 421p 407p EPRA NNNAV 388p 406p 393p 8 Property Portfolio Freehold Investment Leasehold Investment Total investment properties properties properties GBP000 GBP000 GBP000 At 1 April 2018 232,742 21,121 253,863 ------------------------------------- -------------------- --------------------- ----------------- Additions - new properties 15,505 - 15,505 Additions - refurbishments 2,521 179 2,700 Capital expenditure on developments 2,014 - 2,014 Transfer to trading properties (13,509) - (13,509) Loss on revaluation of investment properties (122) (260) (382) Disposals (1,860) - (1,860) ------------------------------------- -------------------- --------------------- ----------------- At 31 March 2019 237,291 21,040 258,331 Additions - refurbishments 3,099 398 3,497 Capital expenditure on developments 1,363 - 1,363 Loss on revaluation of investment properties (3,659) (2,518) (6,177) Disposals (1,500) - (1,500) ------------------------------------- -------------------- --------------------- ----------------- At 30 September 2019 236,594 18,920 255,514 ------------------------------------- -------------------- --------------------- ----------------- Standing Investment Total Trading Assets Total investment properties investment properties held for property properties under properties sale portfolio construction GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 At 1 April 2018 253,863 - 253,863 - 21,708 275,571 ---------------------------- -------------- -------------- -------------- ------------ ---------- ----------- Additions - refurbishments 2,700 - 2,700 - - 2,700 Additions - new properties 15,505 - 15,505 - - Transfer to investment property in the course of construction (3,810) 3,810 - - - - Capital expenditure on developments 1,772 242 2,014 - - 2,014 Transfer to trading properties (13,509) - (13,509) 13,509 - - Additions - trading properties - - - 858 - 858 Loss/(gain) on revaluation of investment properties (452) 70 (382) - - (382) Loss on revaluation of assets held for sale - - - - (291) (291) Disposals (1,860) - (1,860) - (9,661) (11,521) ---------------------------- -------------- -------------- -------------- ------------ ---------- ----------- At 31 March 2019 254,209 4,122 258,331 14,367 11,756 284,454 Additions - refurbishments 3,497 - 3,497 - - 3,497 Capital expenditure on developments - 1,363 1,363 - - 1,363 Additions - trading properties - - - 4,833 - 4,833 Loss on revaluation of properties (6,021) (156) (6,177) (305) - (6,482) Disposals (1,500) - (1,500) - (11,756) (13,256) At 30 September 2019 250,185 5,329 255,514 18,895 - 274,409 ---------------------------- -------------- -------------- -------------- ------------ ---------- -----------
The property portfolio has been independently valued at fair value. The valuations have been prepared in accordance with the RICS Valuation - Global Standards July 2017 ("the Red Book") and incorporate the recommendations of the International Valuation Standards and the RICS valuation - Professional Standards UK January 2014 (Revised April 2015) which are consistent with the principles set out in IFRS 13.
The valuer in forming its opinion make a series of assumptions, which are typically market related, such as net initial yields and expected rental values and are based on the valuer's professional judgement. The valuer has sufficient current local and national knowledge of the particular property markets involved and has the skills and understanding to undertake the valuations competently.
At 30 September 2019, the Group's freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors ("RICS") registered independent valuers. A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the balance sheet was as follows:
Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ---------------------------------- ------------- ------------- --------- Cushman & Wakefield LLP (property portfolio) 275,800 261,625 274,560 Assets held for sale - 21,708 11,756 ----------------------------------- ------------- ------------- --------- Fair value of property portfolio 275,800 283,333 286,316 Adjustment in respect of minimum payment under head leases included as a liability 1,835 1,600 1,600 Less assets held for sale - (21,708) (11,756) Less trading properties (18,895) - (14,367) Less lease incentive balance in prepayments (3,028) (2,346) (2,752) Less rent top-up adjustment (198) (701) (460) Less fair value uplift on trading properties - - (250) Carrying value per financial statements 255,514 260,178 258,331 =================================== ============= ============= =========
Investment properties with a carrying value of GBP232,735,000 (31 March 2019: GBP250,960,000) are subject to a first charge to secure the Group's bank loans amounting to GBP108,103,000 (31 March 2019: GBP119,350,000).
Valuation process - investment properties
The valuation reports produced by the independent valuers are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. This information is derived from the Group's financial and property management systems and is subject to the Group's overall control environment.
In addition, the valuation reports are based on assumptions and valuation models used by the independent valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgment and market observations. Each property is considered a separate asset, based on its unique nature, characteristics and the risks of the property.
The Executive Director responsible for the valuation process verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior year valuation report and holds discussions with the independent valuers. When this process is complete, the valuation report is recommended to the Audit Committee, which considers it as part of its overall responsibilities.
The key assumptions made in the valuation of the Group's investment properties are:
-- The amount and timing of future income streams;
-- Anticipated maintenance costs and other landlord's liabilities;
-- An appropriate yield; and
-- For investment properties under construction: gross development value, estimated cost to complete and an appropriate developer's margin.
Valuation technique - standing investment properties
The valuations reflect the tenancy data supplied by the group along with associated revenue costs and capital expenditure. The fair value of the commercial investment portfolio has been derived from capitalising the future estimated net income receipts at capitalisation rates reflected by recent arm's length sales transactions.
9 Trade and other receivables Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------------------------------- ------------- ------------- --------- Current Trade receivables 2,223 2,531 1,935 Prepayments and accrued income 4,229 2,797 3,527 Other taxes 374 250 177 Other debtors 276 124 604 -------------------------------- ------------- ------------- --------- 7,102 5,702 6,243 =============================== ============= ============= ========= 10 Cash and cash equivalents Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 -------------------------- ------------- ------------- --------- Cash and cash equivalents - unrestricted 12,850 13,105 22,395 Restricted cash 1,115 713 495 --------------------------- ------------- ------------- --------- 13,965 13,818 22,890 ========================== ============= ============= =========
Restricted cash is cash where there is a legal restriction to specify its type of use. This is typically where the Group has agreed to deposit cash with a lender with regards to top-ups received from vendors on completion funds, to be realized over time consistent with the loss of income on vacant units.
11 Trade and other payables Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ----------------------- ------------- ------------- --------- Current Trade payables 1,888 632 1,229 Accruals 1,909 1,757 2,272 Deferred rental income 3,281 3,155 3,457 Taxes 2,418 2,697 2,540 Other payables 204 219 503 ------------------------ ------------- ------------- --------- 9,700 8,460 10,001 ======================= ============= ============= ========= 12 Borrowings Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 -------------------------- ------------- ------------- --------- Current borrowings 1,836 6,124 5,999 Non-current borrowings 105,026 91,692 112,017 --------------------------- ------------- ------------- --------- Total borrowings 106,862 97,816 118,016 =========================== ============= ============= ========= Non-current borrowings Secured bank loans drawn 106,267 93,081 113,351 Unamortised facility fees (1,241) (1,389) (1,334) --------------------------- ------------- ------------- --------- 105,026 91,692 112,017 ========================== ============= ============= =========
The maturity profile of the Group's debt was as follows
Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ----------------------- ------------- ------------- --------- Within one year 1,836 6,124 5,999 From one to two years 1,836 2,436 29,825 From two to five years 92,669 78,447 71,546 From five to ten years 11,762 12,198 11,980 ------------------------ ------------- ------------- --------- Total borrowings 108,103 99,205 119,350 ======================== ============= ============= =========
Facility and arrangement fees
As at 30 September 2019
Unamortised All in cost Maturity facility Facility % date Loan balance fees drawn Secured borrowings GBP000 GBP000 GBP000 --------------------- ------------- ---------- ------------ ----------- -------- Scottish Widows 2.90% July 2026 13,765 (177) 13,942 National Westminster August Bank plc 2.86% 2024 19,560 (440) 20,000 Barclays 3.20% June 2024 41,032 (284) 41,316 August Santander Bank plc 3.72% 2022 25,774 (226) 26,000 Lloyds Bank plc 2.71% March 2023 6,731 (114) 6,845 106,862 (1,241) 108,103 ===================== ============= ========== ============ =========== ========
Facility and arrangement fees
As at 31 March 2019
Unamortised All in cost Maturity facility Facility % date Loan balance fees drawn Secured borrowings GBP000 GBP000 GBP000 --------------------- ------------- ---------- ------------ ----------- -------- Scottish Widows 2.90% July 2026 13,985 (175) 14,160 National Westminster Bank plc 3.35% March 2021 29,204 (185) 29,389 January Barclays 3.24% 2023 38,589 (554) 39,143 August Santander Bank plc 3.74% 2022 25,961 (289) 26,250 Lloyds Bank plc 2.80% March 2023 6,715 (130) 6,845 Lloyds Bank plc 2.95% May 2019 3,562 (1) 3,563 ---------------------- ------------- ---------- ------------ ----------- -------- 118,016 (1,334) 119,350 ===================== ============= ========== ============ =========== ========
Facility and arrangement fees
As at 30 September 2018
Unamortised All in cost Maturity facility Facility % date Loan balance fees drawn Secured borrowings GBP000 GBP000 GBP000 --------------------- ------------- ---------- ------------ ----------- -------- Scottish Widows 2.91 July 2026 14,191 (187) 14,378 National Westminster Bank plc 3.63 March 2021 14,658 (231) 14,889 January Barclays 3.14 2023 39,123 (627) 39,750 August Santander Bank plc 3.69 2022 26,169 (331) 26,500 Lloyds Bank plc 2.91 April 2019 3,675 (13) 3,688 97,816 (1,389) 99,205 ===================== ============= ========== ============ =========== ========
The Group has unused loan facilities amounting to GBP46,500,000 (31 March 2019: GBP26,500,000). A facility fee is charged on GBP20,000,000 at a rate of 1.05% p.a. and a fee is charged on GBP26,500,000 at a rate of 1.30% p.a. and both are payable quarterly. This facility is secured on the investment properties held by Property Investment Holdings Limited and Palace Capital (Properties) Limited. The GBP26,500,000 balance of the unused facilities relates to a Barclays loan secured on the Hudson Quarter, York development held by Palace Capital (Developments) Limited.
13 Derivatives financial instruments
The Group adopts a policy of entering into derivative financial instruments with banks to provide an economic hedge to its interest rate risks and ensure its exposure to interest rate fluctuations is mitigated.
The contract rate is the fixed rate the Group are paying for its interest rate swaps.
The valuation rate is the variable LIBOR and bank base rate the banks are paying for the interest rate swaps.
Details of the interest rate swaps the Group has entered can be found in the table below.
The valuations of all derivatives held by the Group are classified as Level 2 in the IFRS 13 fair value hierarchy as they are based on observable inputs. There have been no transfers between levels of the fair value hierarchy during the year.
Notional Expiry Contract Valuation Unaudited Unaudited Audited principal date rate rate 30 September 30 September 31 March Bank % % 2019 2018 2019 Barclays Bank plc 35,097,900 25/01/2023 1.3420 0.5483 (897) (37) (526) Santander plc 19,530,516 03/08/2022 1.3730 0.5549 (438) (67) (289) -------------- ---------- ---------- -------- --------- ------------- ------------- --------- 54,628,416 (1,335) (104) (815) -------------- ---------- ---------- -------- --------- ------------- ------------- --------- 14 Share capital
Authorised, issued and fully paid share capital is as follows:
Unaudited Unaudited Audited 30 September 30 September 31 March 2019 2018 2019 Ordinary 10p shares 46,388,515 46,388,515 46,388,515 Share capital - number of shares in issue 46,388,515 46,388,515 46,388,515 ================================== ============= ============= ========== Share capital - GBP 4,638,852 4,638,852 4,638,852 ================================== ============= ============= ==========
The Company has set up an employee benefit trust, 'The Palace Capital Employee Benefit Trust', for the granting of shares applicable to directors and employees under the Long-Term Incentive Plan. On 20 June 2019 the Company transferred 150,000 ordinary shares held in Treasury into The Palace Capital Employee Benefit Trust.
On 24 July 2019 the Company granted 67,798 shares, being the awards granted on 17 July 2018 under the Palace Capital Deferred Bonus Plan from The Palace Capital Employee Benefit Trust. On 24 July 2019, 85,461 share options were exercised under the 2016 employee LTIP scheme.
As at 31 March 2019 there were 449,587 shares held in treasury but as a result of the 150,000 shares transferred into the Employee Benefit Trust, there are 299,587 shares remaining in Treasury.
The Company's issued share capital as at 30 September 2019 comprises 46,036,508 ordinary shares which is the denominator for the calculations of earnings per share and net asset value per share. This excludes the 352,007 ordinary shares held in treasury and the Employee Benefit Trust.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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